The other tax deadline: March 31

By Jonnelle Marte

Uninsured Americans who ignore today’s tax deadline for choosing an insurance plan have more than their health to worry about– they could be setting themselves up for a tax hit.

Getty Images

That’s because most of the people who go without health insurance this year will need to pay a tax penalty of $95 or up to 1% of household income for a single person making more than $19,650 a year. Penalties would be due next year when taxpayers file their tax returns for 2014. And while the Internal Revenue Service is limited in how it can collect those penalties — it cannot issue liens the way it can for other tax bills — those penalties can be subtracted from tax refunds.

Some people who ignore today’s deadline could also be passing up a tax break if they would qualify for help buying health insurance. The government is offering premium tax credits to help cover the costs of insurance for single people who make below $46,000 and for families of four who earn less than $94,000 a year. (That income threshold is lower in some parts of the country where premiums are less expensive.) That tax credit is refundable, which means it would be paid out as a tax refund even if no taxes are owed.

The good news is that the White House is giving people more time to complete their applications as long as they try to finish by today. Anticipating that a surge of traffic to HealthCare.gov may cause technical issues, government officials announced last week that people who try to sign up before midnight today but get stuck can get more time to finish their applications. Indeed, the website was out of service Monday morning and a second software glitch that hit around lunch time temporarily prevented people from creating new accounts, according to a Wall Street Journal report.

Consumers will be granted more time as long as they indicate online that they started their applications before midnight tonight, but it’s not clear how long that grace period will be. After that window closes, most people will have to wait until the next open enrollment period starts on Nov. 15. There will be special enrollment periods for people who have major life changes, such as marriage, job loss or divorce. And they’ll generally have up to 60 days after that kind of event to enroll.

While the penalty for not having insurance might be cheaper than paying monthly insurance premiums, it can add up over time. A single person who goes without coverage could pay about $36,000 in penalties over a lifetime, according to an estimate from NerdWallet, which calculated what a person would pay in penalties if they remained uninsured from age 27 until they were 64 years old. The penalty is scheduled to grow to $325 per person or 2% of income in 2015 and $695 per person or 2.5% of income in 2016.

Story Conversation

About Tax Watch

Only two things in this world can be said to be certain, according to Benjamin Franklin. Tax Watch is about one of them. The blog examines the complicated tax issues and legislative changes to help you tackle tough personal finance challenges – and avoid costly tax missteps. The lead writer is MarketWatch reporter Jonnelle Marte. Contributors include columnists Bill Bischoff, Andrea Coombes, and Eva Rosenberg.